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PROPERTY

Q&A: How is Brexit affecting people wanting to buy property in Spain?

While the pandemic has been the main hurdle for those hoping to move to Spain, Spanish property expert and author Sean Woolley says it's time to look at the impact of Brexit with the end of the transition period drawing near. Here he answers some key questions.

Q&A: How is Brexit affecting people wanting to buy property in Spain?
Photo: AFP

The COVID-19 pandemic has been all that we have been thinking about since March, but as we enter the final quarter of 2020, the end of the transition period for the UK to leave Europe is fast approaching and things are going to change. To support UK buyers planning to buy property in Spain who are concerned how the withdrawal will affect them, Sean has compiled and answered buyers’ questions about Brexit and buying property in Spain. 

What are the implications for those wanting to invest in Spanish property as the transition period deadline of December 31st draws closer? 

As we know, the transition period ends on December 31st 2020. Until then, British citizens have the same rights in the EU as previously. Nothing changes until January 1st 2021. The withdrawal agreement allows British citizens to continue to live, work or study in Spain with the same rights as an EU citizen, but only if they register as resident in Spain before December 31st. 

Does Brexit mean that the British can’t buy property in Spain? 

No, not at all. All foreigners are allowed to buy property in Spain regardless of their nationality. It doesn’t matter whether your home country is inside or outside of the EU.

READ MORE: How long will British second-home owners in Spain be able to stay after Brexit?

 

Photo by Elisabeth Agustín on Unsplash

Has Brexit impacted the Spanish property market?

Since the UK announced its decision to leave the EU, there has been a slight drop in the number of British buyers (especially due to sterling’s weakness against the euro since the Brexit referendum result), but purchases from other countries have remained steady, thereby balancing out the impact.

Has Brexit affected property prices in Spain? 

According to the Association of Property Registrars, Spanish property prices went up by 4 percent in Q1 2020 compared to Q4 2019, and by 6.96 percent year on year. Since prices bottomed out in Q4 2014 (prior to Brexit), they have gone up by 40.85 percent, suggesting that Brexit has had no effect on prices at all.

Of course, we are currently faced with another crisis with the COVID-19 pandemic, but this has predominantly caused a series of welcome pricing corrections rather than a full-scale collapse of the market. Buyer interest remains strong, new vendor instructions are not flooding the market, and mortgage funding is readily available.

Has Brexit made it more expensive to buy property in Spain? 

Sterling has been weaker since the Brexit referendum result, thereby making it more expensive for Brits to purchase in Spain. However, by using a currency company you can minimise the costs of transferring money and take advantage of the best rate possible for your purchase. 

OPINION:Travelling to Spain after Brexit will be more complicated and costly

AFP

Will I be able to get a mortgage in Spain after Brexit?

As a non-resident and provided you can provide proof of income and a sound credit record, you can take out a mortgage in Spain, usually up to a maximum of 70 percent loan to value or purchase price, whichever is lower. There is a possibility that from 2021, British buyers may only be eligible for a lower LTV of perhaps 60 percent-65 percent – on a par with other non-EU applicants, however Spanish banks regularly approve 70 percent LTV for Swiss (non-EU) nationals, and considering that British buyers continue to account for a large proportion of transactions, a tightening of lending seems unlikely.

What about property purchase taxes?

Everyone who buys a property in Spain is liable for the same purchase costs and taxes, and there are no plans to change it.

Will I be able to let my Spanish property after December 31st?

Foreigners are freely permitted to let their properties in Spain for holidays and longer-term rentals. This is not set to change.

What about rental income tax? 

Once the transition period ends on 31st December, British owners in Spain will probably be liable for a slightly higher tax on rental income. At the moment, EU citizens pay 19 percent while non-EU citizens pay 24 percent. Brit owners may therefore fall into the higher bracket by default at the end of the year. However, this law is currently being challenged in the European courts as unfair discrimination, so could well be overturned.

For how long will I be able to stay and live in Spain? 

Now we’re getting to the crux of the matter. No firm decision has been made by the UK and Spanish governments regarding visas for British nationals travelling to Spain. Bearing in mind that the Spanish government are especially eager to attract foreign tourism and investment, it is widely expected that tourism visas will not be required for British nationals entering Spain. Currently the rules are that non-EU visitors to Spain may stay for up to 90 days within a 6-month period without needing a visa and this seems likely to apply to British visitors as well.

The cloudy issue surrounds those who wish to stay for longer than 90 days at a time. This needs to be decided, and there is a possibility that a residence visa of some sort will need to be applied for.

So, how could I obtain a residence visa after December 31st? 

At the moment, non-EU buyers have the chance to apply for a Golden Visa which includes resident permits for the buyer and their dependents in exchange for making an investment of at least €500,000 in property. One of the advantages of this scheme is that you do not actually have to live in Spain or pay taxes here, although you will need to visit once a year if you want to renew it. 

It therefore seems that the only sure route to residency for British buyers post Brexit will be to apply for a Golden Visa, but with the current rules, this would restrict the visas to those spending €500k+ on property. Perhaps this figure will be lowered to accommodate more buyers and investment?

Can I obtain residency if I buy a property before 31st December 2020? 

Under the withdrawal agreement, all British citizens who register as resident in Spain before 31st December have the right to live in the country with the same rights as EU citizens. You will need to have either the title deeds to a property here OR a long-term rental contract in place to provide evidence that you were here before the deadline and are planning to be here long-term. The process is straightforward but it needs to be done before 31st December. That’s just over 3 months away!

These questions have been submitted by Cloud Nine Spain followers on Facebook and you can see Sean answering them on YouTube

Sean Woolley is the Founder and Director of leading real estate agency Cloud Nine Spain. During lockdown he wrote the book From the Ground Up – The Insider’s Guide to Buying Spanish Property, sharing his years of experience, real life stories, tips and tricks with buyers interested in investing in Spanish Real Estate, which is now available on Amazon. 

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PROPERTY

Why Spain is unlikely to ever ban foreigners from buying property

After several regions around Spain have attempted to bring in limits on property purchases by foreigners, members of Spain's government coalition have even started floating the idea of an outright ban at a national level.

Why Spain is unlikely to ever ban foreigners from buying property

In recent years several regions around Spain have attempted to put limits on foreigners buying homes and clamped down on tourist rentals. These are mainly in areas traditionally popular with foreigners, and many have become places with highly inflationary property markets.

In 2022 Canary nationalist political party Nueva Canarias demanded the regional government address the large number of property purchases by non-residents in the archipelago, and even suggested a limit on the number of properties that can be bought by foreigners altogether in the popular holiday islands.

READ ALSO: Will Spain’s Canary Islands limit sale of properties to foreigners?

Property prices have surged across Spain in recent years, sparked in part by an influx of post-pandemic purchases by foreigners, as well as tourist accommodation geared towards wealthy remote workers and digital nomads pushing up rental prices and pricing out locals. Increasingly, landlords will buy properties with the aim of converting them into Airbnbs, thus removing them from the pool of available (and affordable) housing stock for locals.

This comes after Spain’s other archipelago, the Balearic Islands, also started this same debate in November 2022, with the regional Senate agreeing to discuss solutions.

In the two decades from 2000-2020, the islands’ population grew by 50 percent – rising from 823,000 to 1,223,000 inhabitants. Around a third (32.67 percent) of property purchases in the Balearics are made by foreigners, and of those 57.4 percent are residents, while the remaining 42.6 percent are non-residents.

National ban?

But it’s not just a regional issue. In 2024, the debate rumbles on in parts of Spain particularly affected by foreign home owners and members of the Spanish government are even proposing similar measures at a national level. Though, it should be said, no policy has been decided on yet, and any move such as a ban (in whatever form, on whatever type of property) or even a limit would likely face fierce opposition from the main opposition parties, notably the centre-right Partido Popular (PP).

Sumar, the far-left junior coalition partner in the Spanish government, has even gone as far as proposing a three year ban on the purchase of housing by investment funds and non-residents in Spain.

This was recently outlined in a (for now) non-legislative proposal that was presented to the Spanish Congress’ Housing Commission. It was roundly rejected with the vote of, among others, its coalition partner in government, the Socialists (PSOE). That’s not to say the PSOE is totally against the idea, however.

Socialist Minister for Housing Isabel María Pérez said of the plans: “We agree on the philosophy of the proposal, but with nuances,” she said. “We have submitted an amendment but we think it will not be accepted, so we will not be able to support this bill,” she added.

So, from that we can take that the junior partner in the Spanish government wants to ban non-residents and investment funds from buying property in Spain, and the senior partner (Prime Minister Pedro Sánchez’s party, no less) supports the principle but not the practicalities.

READ ALSO: Spain’s new housing minister vows to protect second homeowners

The argument against

Clearly, non-resident foreigners buying up property in Spain, particularly in its space starved archipelagos, contributes to price inflation, saturates the market, and plays a role in pricing locals out of their own neighbourhoods.

However, it’s not that simple. Clearly, there is a difference between a non-resident foreigner buying a holiday home (perhaps to rent out as tourist accommodation for half the year) and a resident foreigner buying property to live in.

READ ALSO: How important are foreign second homeowners to Spain?

This difference has, for now, been reflected in proposed limits at both the regional and national level, rather than outright bans.

However, foreign home owners in Spain also make a huge contribution to the Spanish economy. In 2022 foreigners with a second home in Spain contributed €6.35 billion to Spanish GDP and generated more than 105,000 jobs in the tourism sector, according to the study “The economic impact of residential tourism in Spain” done for the Spanish Association of Developers and Builders (APCE) by PricewaterhouseCoopers (PwC).

The financial contribution made by these second-home owners in Spain is clearly significant. In fact, experts point out that the money brought into the Spanish coffers by foreign homeowners even outstrips some major industries.

“The contribution of residential tourism to GDP is triple that of the textile industry, double that of the timber industry and the same as the manufacture of pharmaceutical products in Spain,” Anna Merino, director of the Economics team at PwC, said when presenting the study. Every euro spent by ‘residential tourists’ adds €2.34 to Spanish GDP. On top of this direct contribution to the Spanish economy, the surrounding economic activity associated with the spending generated 105,600 full-time jobs in 2022.

So, there’s clearly an economic argument against banning foreign property purchases completely.

In the case of the Balearic Islands specifically, the proposals have met some opposition. The Balearics, which generates 35 percent of its GDP from tourism, according to figures from Caixa Bank, has long been a holiday or second-home hub for wealthy foreigners.

On this point, right-wing Popular Party member Sebastià Sagreras suggested in the regional parliament back in 2022 that conflating the foreign-buyer property market with local shortages is unhelpful, adding that the properties bought by foreigners, often worth more than a million euros, “do not compete” with those that cost €200,000 or €250,000 and are largely bought or rented by national residents.

Is it even legally possible?

Denmark, Malta and the Aland Islands in Finland all have restrictions on how non-resident foreigners can buy properties in their territories. However, they introduced these before entering the EU and these limits were factored in and accepted by Brussels. For Spain to do this, it would be much more difficult.

For local authorities in both the Balearic and the Canary Islands it could prove difficult to go against the EU’s legal principles of the free movement of people and capital, experts say.

This means that other potential solutions may be needed. Though there doesn’t seem to be a national level ban on foreigners from buying properties in Spain anytime soon, several regions have been attempting to do it for a couple of years, at least for non-residents, and even the national government is beginning to try and do something about it.

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